New home sales miss expectations in August
* New home sales rose 0.7% to a seasonally adjusted annual rate of 429,000. But the "increase" stemmed from a downward revision to July's number (to 426,000 from 433,000). Sales missed the average forecast of economists polled by Bloomberg (440,000). At the same time, May and June sales figures were revised higher (by 5,000 and 9,000 units, respectively). Confused yet?
* Regionally it was a mixed bag. Sales fell 5.8% in the Midwest and dropped 16.3% in the Northeast. They were flat in the South and up 12.2% in the West.
* The raw number of homes for sale continues to decline. It dropped to 262,000 from 270,000 in July. That's the lowest reading since November 1992 (a tie). You have to go all the way back to February 1983 to find a lower number. The months supply at current sales pace indicator of inventory fell to 7.3 from 7.6, the lowest since January 2007.
* The median price of a new home dropped 9.5% to $195,200 from $215,600. That's the lowest level since October 2003. On a year-over-year basis, prices fell 11.7%, the second-worst decline for this cycle.
New home sales continue to stabilize, but at extremely depressed levels. And it's taking significant price cuts to move product off the lot, so to speak. The median price of a new home plunged by almost 12% last month, the second-biggest year-over-year drop of the cycle. That leaves new homes at the cheapest level in almost six years.
The good news? Those price cuts and dramatic cutbacks in home construction are clearing out inventory in a big way. We now have the fewest new homes for sale in this country since November 1992. That month was a tie, by the way. We haven't seen a lower reading since Ronald Reagan's first term as president. The existing home market remains oversupplied, but even there, inventories appear to have peaked. This will lead to a gradual stabilization in construction and sales, followed by pricing (with a lag).